Securities and Exchange Commission Chairwoman Mary Jo White assured compliance officers Tuesday that if they act “within the law” they should not fear enforcement action.
“Although we occasionally bring enforcement actions against compliance personnel, compliance officers who perform their responsibilities diligently, in good faith, and in compliance with the law are our partners and need not fear enforcement action,” White told compliance officers at the National Society of Compliance Professionals annual meeting in Washington.
Said White: “We have a great deal of respect for you and are far more interested in helping you succeed before an examination than we are in catching your firm in a violation in the course of an examination.”
John Walsh, who held various posts during his two decades at the SEC — most notably as chief counsel for the SEC’s Office of Compliance, Inspections and Examinations — and is now a partner in the securities practice at the law firm Sutherland Asbill & Brennan LLP, noted at the event that White’s comments show that there is “a real effort that [the agency] is not trying to single out compliance” for enforcement actions. “That’s good. I’m glad to hear that,” Walsh said. ”But the proof is going to be in the cases they bring.”
Walsh, who warned White in June to stop suing compliance officers “or the future of the profession may be at risk,” told ThinkAdvisor that the SEC’s compliance sweep and some previous cases that the agency brought had compliance professionals worried that they were being “targeted” by the agency. “There was enough to make people nervous,” Walsh said, but compliance pros at the conference “were very pleased with what [White] had to say.”
Walsh said during a lunch session with Lee Augsburger, senior vice president and chief compliance officer at Prudential Financial, that compliance officers grapple with knowing when “enough is enough” in terms of having an adequate compliance program.
“It depends,” replied Augsburger. “I sleep like a baby at night; I wake up every half hour crying,” he said half in jest. Compliance officers must identify the scope of their responsibilities, he advised, and determine the firm’s “risk assessment” plan. “If you have a solid risk assessment and you follow it then you have the answers for any regulator.”
Walsh agreed: “If you have a thoughtful process and clear risk assessment you can get a good night’s sleep.”
White told compliance professionals that they are “on the front lines working day in and day out in an effort to prevent people from cutting corners,” and are “a critical line of defense against violations of the securities laws and regulations.”
Compliance professionals’ work “is extremely important to [the SEC] as well as to investors because you are positioned to prevent infractions from happening in the first place, rather than coming to our attention only after harm has been done.”
Said White: “As much as [the SEC] strives to be everywhere we can be, our resources are limited and always stretched.”